The appreciation of the Solomon Islands dollar by five percent means goods will be imported at cheaper prices.
Some importers can increase their volume of import for the same price they used to purchase fewer goods before.
This will increase supply to meet the demand thus reduce inflation.
The Finance Minister Gordon Darcy Lilo when announcing the appreciation of the currency value last week urged importers to pass down the benefits to customers and consumers.
While regular importers, customers and consumers stand ready to benefit from the rise in the SBD value, exporters will be affected.
As such some rural based producers will also be affected negatively as a result of the increase price to export.
Cocoa and copra farmers will be some of the rural populace that will be feeling the pinch.
In developed counties where export dominate imports, effects were likely to be massive including loss of jobs.
But the Solomon Islands where imports exceed exports, benefits will also be felt more.
But other major areas that stand to be hurt by a stronger dollar is the tourism industry as a stronger dollar would make travel to the Solomon Islands more expensive for foreign visitors, who might look for better bargains elsewhere.
Still, it's not all bad news. A stronger dollar does offer positives for the economy, with its impact on domestic prices.
A rising dollar tends to lower inflation, particularly commodity price inflation.
Second, and equally significant, a stronger dollar boosts the attractiveness of investments. Investors scour the world in search of return and yield.
That's because foreign investors know that not only will they receive the gains from the companies' profits, but also a purchasing power "bonus," because a rising dollar means those dollar-denominated stocks will be worth more relative to their home currencies.
A stronger currency also makes it easier for a nation to borrow and finance its debt, all other factors being equal.
In sum, all other factors being equal, it's better for a nation to have a stronger currency because it usually means its economy is growing, its fiscal and monetary policies are sound and its products and services are competitive in global markets.
However, without question, a stronger currency is a two-edged sword. Particularly regarding a stronger dollar, there is an "on one hand, on the other hand" dimension to it.
The 5 percent appreciation of local dollar will become effective today.
By EDNAL PALMER
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